Home > business, business law, Real Estate, startups > Another Court Lesson for Business Owners: Read Your Contracts Before You Sign.

Another Court Lesson for Business Owners: Read Your Contracts Before You Sign.

I recently read yet another court decision that provides a classic example for businesses owners of the consequences for not reviewing your contracts before signing.

The case: the October 6th, 2016 Michigan Court of Appeals decision of Earl Pegues, LLC v Izis General Contractors, LLC.

The dispute concerned a construction agreement.

The property owner, Pegues LLC engaged a contractor to construct a restaurant for the price of $1,050.000 in my hometown of Saginaw.

Pegues LLC claimed the contractor overbilled by approximately $123,000.

The main problem:

Pegues had signed off on the Contractor’s Sworn Statement and therefore authorized the title company to release the funds and therefore, unwittingly, agreed to the alleged overbilling.

Thereafter, Pegues sued for breach of contract and fraud.

During the lawsuit, Pegues admitted that he simply “did not look at the figures.” That he “did not understand the sworn statement when the bank gave it to [him] to sign.

Pegues admitted – “It was my oversight.”

The trial court dismissed all claims against the Contractor – Pegues appealed, and the Court of Appeals upheld the dismissal.

Law:

It is your responsibility to know what you are agreeing to before you sign a contract.

The Court of Appeals reasoned:

“It is well-settled that a person who signs a contract cannot have the contract set aside merely because he was negligent in failing to read the terms.” Citing Shay v Aldrich, 487 Mich 648, 680-681 (2010).

Further:

“[A] person who signs and executes an instrument without inquiring as to its contents cannot have the instrument set aside on the ground of ignorance of the contents.” Christensen v Christensen, 126 Mich App 640, 645 (1983).

Conclusion:

Small business owners often times are wearing many “hats”. They are working with limited cash flow and are forced to make many choices. Many of these choices are in areas outside of their expertise.

Oftentimes startups and small business owners will “cut corners” to be more efficient and cost-effective.

When it comes to signing a legally binding contract – it is simply not worth cutting corners on.

The cost of what you do not know can be significant.

Question? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

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